'There's No Chance' Of Yahoo Buying Yelp And Here's Why

Since the time The Wall Street Journal reported that Yelp Inc YELP is again in search of a potential acquirer, the company’s shares have risen more than 20 percent. Yahoo! Inc. YHOO is featuring prominently among the companies that are being discussed on the Street as potential acquirers of Yelp.

However, Eric Jackson, Ironfire Capital founder and president, thinks that there’s very little chance Yahoo will be acquiring Yelp. Jackson was on CNBC recently to discuss why he thinks so.

No Chance

“On behalf of Yahoo shareholders, Yahoo and Marissa Mayer should not be thinking about touching this company,” Jackson said. “And I don’t think there’s any chance that they will. Yahoo only has $6 billion in net cash and they have already promised a majority of that to come back to shareholders through share buybacks in the future, so there’s no chance Yahoo buys this company.”

Clash of Clan

On being asked whether he will sell his Yahoo shares if the company goes on to acquire Yelp, Jackson said, “Well, I wouldn’t sell, but have you ever seen those clashes of clan (Clash of Clan) TV commercials, where you have got the Huns who are storming the castle? I think that would be sort of a preview of what you could expect to see from Yahoo shareholders reaction to that decision from Sunnyvale.

Selling During Weakness

Jackson was asked if he sees value in Yelp. He replied, “Well, I think there’s value there, but I think it is interesting that Yelp’s board is putting themselves up for sale here because I mean the whole local space has been in a bit of Bermuda Triangle for so many companies.

According to Jackson Yelp’s board decision to sell the company when its shares are touching 52-week lows, its headcount has increased 50 percent year-over-year and it has had 3 bad quarters “sort of smacks of doing this out of weakness rather than strength.”